Energy Policy and Peak Oil


This week GW Bush called for a lift on the ban on certain kinds of oil drilling.  The drilling is likely inevitable.  The tension between oil supply and oil demand is only going to get stronger.  The price at the pump will steadily increase until we see a fundamental shift in the way we approach energy and oil.  That shift involves a massive investment in public transportation, new renewable power generation, electric or plug-in electric vehicles, and a relocalized economy.  Soon we will face an unrelenting decline in oil prices.  Until we change the price at the pump will continue to increase.  I believe the pressure to drill anywhere and everywhere will overcome any environmental concerns.

Bush blamed the lack of drilling for the high oil prices.  The world uses 85 million barrels of oil a day and Bush claims expanded drilling would net 18 billion barrels of oil.  That would supply a little more than half the market for a year.  It would take years for the production to start and it did it would only offset a fraction of the decline in mature oil fields like those in Mexico and the North Sea.  In the end such drilling would only help a little bit for a little while. 

It is a radical thought but the best government policy would be to raise gasoline taxes and take that money and invest heavily in the transition to what will eventually become a post-oil economy.  The scope of such a transition is massive and the longer we wait the harder it will get.  Unfortunately the idea would be political suicide.   It is too bad really.  Either government policy can drive down demand and spur innovation or the lack of supply will.  In the first scenario the American government gets the cash in the other foreign governments get the cash.  If there is a silver lining the lack of a coherent American energy policy it really benefits Canada.  Right now the average American driver is doing a great job of subsidizing the governments of Alberta, Saskatchewan and Newfoundland.

Keep driving your truck Mike, I need another tax break so I can get a new HD TV! 😉

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